Chao v Chao (No 4)

[2008] NSWSC 1413

CITATION:	Chao v Chao (No 4) [2008] NSWSC 1413
HEARING DATE(S):	9 December 2008
JURISDICTION:	Equity Division Expedition List
JUDGMENT OF:	Brereton J
EX TEMPORE JUDGMENT DATE:	9 December 2008
DECISION:	Plaintiff to pay defendant’s costs of motion for leave to reopen. Defendant to pay two-thirds of plaintiff’s costs of proceedings, including the reopened hearing and affidavits filed and served in connection with it
CATCHWORDS:	PROCEDURE – costs – departing from the general rule – application by unsuccessful defendant – where several offers of compromise made but not in accordance with the (NSW) Uniform Civil Procedure Rules – relevance of such offers to exercise of discretion in respect of costs – where defendant achieved substantial success in part of cross-claim – whether costs should reflect defendant’s success on particular issues - PROCEDURE – costs – interlocutory proceedings – costs in respect of defendant’s application to reopen main proceeding – where plaintiff unsuccessfully opposed reopening but defendant required indulgence from the Court – where plaintiff contributed to necessity for reopening – relevant considerations - PROCEDURE – costs – whether sum payable by plaintiff to defendant should be paid into court pending assessment of costs payable by defendant to plaintiff
CATEGORY:	Consequential orders
CASES CITED:	Baker v Towle [2008] NSWCA 73 Dunstan v Rickwood (No 2) [2007] NSWCA 266 Hayes v Maquis [2008] NSWCA 10 Kardos v Sarbutt (No 2) [2006] NSWCA 206
PARTIES:	Ping Jung Chao (plaintiff) Sheng-Chun Chao (defendant)
FILE NUMBER(S):	SC 4398/07
COUNSEL:	Mr G P F Rundle (plaintiff) Mr N G Ford (sol) (defendant)
SOLICITORS:	Helen Sin Legal Pty Ltd (plaintiff) Brischetto & Ford Solicitors (defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
EXPEDITION LIST

BRERETON J

Tuesday, 9 December 2008

4398/07 Ping Jung Chao v Sheng-Chun Chao

JUDGMENT (ex tempore)

1 HIS HONOUR: Following hearings which took place between 8 and 15 May, AND on 3 June and 26 August, I gave judgment in these proceedings on 4 November 2008, when I made the following orders:

1. Declare that the defendant Sheng-Chun Chao holds the property situate at and known at 1 Horace Street St Ives in the State of New South Wales being the land comprised in Folio Identifier 32/29027 (“Horace St”) upon trust for the plaintiff Ping Jung Chao, but subject to a charge securing to the defendant the principal sum of $140,896.77 and interest at 10% per annum from 1 November 1999 which as at this date amounts to $126,807.09, totalling $267,703.86.

2. Declare that the defendant is bound to indemnify and keep indemnified and exonerate the plaintiff and Horace Street in respect of all liability under mortgage registered number 3176630 to the Commonwealth Bank of Australia (“the Mortgage”).

3. Order that within 42 days (or such further time as the parties may agree):

3.1 the plaintiff pay the defendant the said sum of $267,703.86;
3.2 the defendant procure the discharge of the Mortgage and execute and deliver to the plaintiff a transfer in registrable form to her of all his right title and interest in and to 1 Horace Street, unencumbered.


4. Reserve liberty to apply by arrangement with my Associate on 3 days’ notice in the event of any difficulty arising in the implementation of these orders, including for alternative relief in the event that the defendant does not discharge the mortgage, any such notice to specify the relief to be sought.

5. Order that the defendant pay the plaintiff’s costs.

2 In addition, I reserved liberty to apply for any special costs order by arrangement with my Associate within seven days. No such arrangement was made, but on 10 November 2008, within the seven day time limit, the defendant filed a motion seeking, in lieu of the costs order made on 3 November 2008, orders that the plaintiff pay the defendant’s costs of the notice of motion for leave to re-open (heard on 3 June 2008), and the reopened hearing (on 26 August 2008), and that otherwise each party pay his and her own costs of the proceedings.

3 To the extent that my observations in Kardos v Sarbutt (No 2) [2006] NSWCA 206 remain authoritative, in the light of the subsequent decision of the Court of Appeal in Dunstan v Rickwood (No 2) [2007] NSWCA 266; (2007) 38 Fam LR 491, [35]-[37] (McColl JA, Beazley and Ipp JJA agreeing); Hayes v Maquis [2008] NSWCA 10, [145] (McColl JA); cf Baker v Towle [2008] NSWCA 73; (2008) 39 Fam LR 323, [82] (Basten JA), I would nonetheless not accept that the present proceeding is one analogous with matrimonial proceedings, partnership disputes or proceedings under (NSW) Conveyancing Act 1919, s 66G. These were not a form of adjustive property proceedings, but an application by one party for a declaration that the other party held (and had always held) certain property on trust for her, which was resisted by the other party. In any event, even if there were such an analogy, I would not have accepted the submission, as this was a case in which any joint relationship or joint enterprise had broken down without attributable fault. The defendant’s assertion that he was beneficially entitled to the property, and his threat to eject the plaintiff and to have the property sold, is fundamentally inconsistent with the rights which I have ultimately found and declared in these proceedings.

4 Both parties sought to rely on offers that had been made in the course of the proceedings. None of them were offers of compromise under the (NSW) Uniform Civil Procedure Rules (“UCPR”). Accordingly, I am not bound to take them into account, although I can.

5 The defendant made three offers. The first, on 16 October 2007, proposed that the property be sold and the plaintiff receive one half of the net proceeds. It was expressly stated not to be an offer capable of immediate acceptance, but was subject to execution of a mutually acceptable deed. The defendant’s second offer was made on 4 February 2008. It proposed a consent declaration that there was a resulting trust in favour of the plaintiff to the extent of 31.44 per cent of the defendant’s beneficial interest; that the plaintiff vacate within 28 days; and that the defendant pay the plaintiff half of the net proceeds of sale. Each of those two offers was inferior, from the plaintiff’s perspective, to the result she ultimately attained, which was a declaration that she was beneficially entitled to the property, subject to a charge which, on the material presently before me, is equivalent to slightly in excess of 30 per cent of the value of the property – mathematically an approximate reversal of the 69/31 apportionment reflected in the defendant’s offer.

6 The defendant’s third offer, made on 24 April 2008 – very shortly before the hearing commenced – proposed that the parties seek a consent declaration that the defendant held the property on trust for the plaintiff and himself, in proportions to be determined by the Court upon inquiry, and that the matter be referred for inquiry to determine the exact amount of their respective contributions. This offer, if accepted, would not have resolved the litigation, and would have left open for argument whether the interests of the plaintiff and the defendant were each as little as zero or as much as one hundred per cent. It would have removed very little from the scope of the dispute that ultimately had to be determined.

7 None of the offers, if accepted, would have seen the plaintiff in a superior position to that which she ultimately obtained. None of them, therefore bears in any significant way on the costs discretion, at least so as to tell against the prima facie position that costs should follow the event, on which objectively the plaintiff succeeded.

8 The plaintiff herself made an offer on 1 April 2008, by which she proposed that the property be transferred to her; that she contribute $190,000 to the discharge of the mortgage and the defendant pay the balance; that she resign as a director of One Stop Dee Jay and sell her shares to the defendant for $50,000; and that each party pay his or her own legal costs. The sum of $190,000 referred to in that offer exceeded the principal but was substantially less than the total of principal and interest that I subsequently found the defendant was entitled to be paid. The offer contains a provision that each party pay his or her own costs. It would not have complied with the UCPR relating to formal offers of compromise, had it otherwise been expressed to be one. While it is true that the term providing for each party to pay his or her own costs may, had the matter ultimately been worked out, have resulted in that offer being no less unfavourable to the defendant than the result he ultimately obtained, it is complicated, not only by the costs provision, but also by the introduction of provisions concerning the shares in One Stop Dee Jay. It is not readily capable of comparison to the result ultimately obtained.

9 In those circumstances, where parties choose not to avail themselves of the mechanism provided by the UCPR for the making of formal offers of compromises with distinct cost consequences, I do not see why I should take this into account on exercise of the costs discretion.

10 The next matter which the defendant raises is that he achieved a measure of success on his cross-claim, in that he obtained a declaration that the plaintiff’s beneficial interest in the property was subject to a charge securing in his favour his contributions totalling $267,703.86 – which, as Mr Ford points out for the defendant, approximates something slightly in excess of 30 per cent of the supposed value of the property.

11 Although I did not formally dispose of the cross-claim, it is appropriate – now that the matter has been drawn to my attention – that I make an order otherwise dismissing the cross-claim, its subject matter having been incorporated in the declaration and orders made on the plaintiff’s claim. But that does not detract from the proposition that the defendant did obtain a measure of success (albeit only on a part of the cross-claim, other parts of the cross-claim having been conspicuously unsuccessful). It is correct, as Mr Ford submits, that part of the litigation was occupied by the defendant having to prove his post-acquisition expenditure, which the plaintiff did not concede and which she unsuccessfully contended she had reimbursed.

12 I do not think that justice would be best achieved simply by ordering that the plaintiff/cross-defendant pay the defendant/cross-claimant’s costs of the cross-claim. As I have said, the defendant’s success on the cross-claim was only partial. Moreover, segregating the time and costs that were attributable to the cross-claim from those attributable to the claim would be practically very difficult.

13 Where the plaintiff has substantially succeeded, the Court is disinclined to make special costs orders in respect of individual issues on which the defendant may have had some success. But in this case, in which the plaintiff conceded no interest in the property in favour of the defendant, yet the defendant ultimately established a substantial interest (though not in the form for which he contended), it is appropriate to make some allowance, in the ultimate distribution of the costs burden of the proceedings, for that element of success.

14 The proportion which his success bears to the value of the property is a rough indication of an appropriate discount from the costs to which the plaintiff would otherwise be entitled. But it should be born in mind that this is very much a broad axe approach in which the Court, in exercising its discretion, endeavours to fashion an order which does broad practical justice as to allocation of costs between the parties, bearing in mind on the one hand, the plaintiff’s ultimate substantial success, but, on the other, the defendant’s not insignificant success on an aspect which was never conceded by the plaintiff. On that basis I think the appropriate order to be that the defendant pay two-thirds of the plaintiff’s costs of the proceedings.

15 The next matter that I need to address is the costs of the notice of motion for leave to re-open. As I pointed out in the judgment of 3 June 2008, the fact of previous ownership by the defendant of a property in Taipei was plainly in issue on the affidavits by 3 April 2008. The defendant needed an indulgence to be granted leave to re-open. I was persuaded that, though the matter was in issue on the affidavits, it had assumed greater significance in the course of the trial, and that thereafter all reasonable efforts had been made to obtain the title search as quickly as possible, and that there would be limited prejudice to the plaintiff from granting leave to re-open. Ultimately, the re-opening resulted in a substantial flurry of further affidavit material, and a further day’s hearing, which became much more confined when the remoteness of the material adduced in the re-opening on both sides from the matters ultimately in issue became apparent.

16 On the one hand, the plaintiff unsuccessfully opposed the application for leave to re-open. In addition, the necessity for it was largely attributable to the misleading if not false evidence that had originally been given by or on behalf of the plaintiff in respect of the Taiwanese property. (My use of the word "false" is not intended to convey necessarily deliberately false, but objectively false, evidence). On the other hand, the defendant needed an indulgence to re-open in circumstances where the issue had previously been joined, and gained that indulgence largely because of the absence of significant prejudice to the plaintiff, and ultimately, the material adduced on the re-opening, though extensive, did not affect the result.

17 Had the plaintiff merely opposed the application to re-open, without some element of fault on the plaintiff’s part in contributing to the situation that necessitated it, there would have been a strong case that the defendant should pay the plaintiff’s costs of the application for the indulgence to re-open. But as the plaintiff bears some of the responsibility for the situation tends to offset the consideration that the defendant required an indulgence to re-open.

18 The circumstance that the result of the re-opening did not affect the outcome is more relevant to the costs of the further affidavit evidence that was adduced subsequent to the grant of leave, and the further hearing on 26 August, than to the costs of the motion for leave to reopen.

19 In circumstances where the defendant’s need for an indulgence is counter balanced by the plaintiff’s partial responsibility for the circumstances that gave rise to the application for leave to re-open, I think the prima facie rule should apply, and the plaintiff should pay the defendant’s costs of the notice of motion filed on 23 May 2008 and heard and determined on 3 June 2008. That is not intended to include the subsequent costs of the reopening, including the evidence gathered, filed and served in connection with the reopened hearing, nor the further hearing on 26 August 2008, all of which will form part of the costs of the proceedings generally.

20 The plaintiff seeks an order that, by way of variation of order 3.1 made on 4 November 2008, the sum of $267,703.86 payable by the plaintiff to the defendant be paid into the plaintiff’s solicitors trust account, upon an undertaking that the plaintiff will expeditiously proceed to assessment of her costs. This is proposed in circumstances where the plaintiff asserts that the costs to which she will be entitled may even exceed the amount payable by her to the defendant under the order of 4 November. In this way, the plaintiff, in effect, seeks security for the costs order, or what is in substance a Mareva injunction, preserving assets of the defendant pending assessment of the costs to which the plaintiff is entitled.

21 The defendant’s entitlement to receive the sum in question is interdependent with his obligation to procure the discharge of the mortgage over Horace Street and to transfer his interest in Horace Street to the plaintiff. There can be no serious doubt that his ability to procure a discharge of the mortgage would be adversely affected if he did not have available to him the sum of $267,000. Albeit it from the Bar table, I am informed that he has given the plaintiff a direction to pay the said sum to the Commonwealth Bank and, in circumstances where that has not been disputed from the plaintiff’s side of the record, I accept it for present purposes. Accordingly, the sum to be paid to the defendant will be applied towards the discharge of the mortgage over the property which the plaintiff claims.

22 The evidence establishes that the defendant has other assets in the jurisdiction, and in particular his interest in the property at Curagul Road, North Turramurra. Although it is fair to say that the relations between these parties are fraught, and one cannot have any confidence that either will do his or her best to position themselves to meet their obligations to the other, there is not before me the type of evidence that would warrant the grant of a Mareva order particularly where there is evidence that the defendant has other assets in the jurisdiction.

23 A costs creditor is ordinarily an unsecured creditor. Bearing in mind that the defendant is known to have obligations to banks – including the mortgage to the Commonwealth Bank which the orders of 4 November require him to discharge – to deny him from access to the $267,000 would unreasonably interfere with his obligations to third parties and would unduly prefer the plaintiff’s position, particularly since the moneys are to be applied to discharge a mortgage that affects the property to be transferred to her.

24 I am therefore not prepared to make the orders sought by the plaintiff.

25 My orders are:

1. Revoke order 5 made on 4 November 2008 and in lieu thereof order that the plaintiff pay the defendant’s costs of the motion filed on 23 May 2008 and heard on 3 June 2008.

2 Order that save insofar as any special order otherwise provides, the defendant otherwise pay two-thirds of the plaintiff’s costs of the proceedings, including of affidavits filed and served subsequent to 3 June 2008 and the hearing on 26 August 2008.

3. Costs of the motion filed on 10 November 2008 be costs in the proceedings generally.

**********